To think, we're just getting started. Oh, my, how interesting this ride will be.
The loans aren't going to be paid back. The bag holders are just now smelling the coffee. And a world financial system built on the back of a Great Bubble run amok will now collapse.
It hath been foretold.
HSBC fires US executives as it works to get Household in order
"Embarrassing", "catastrophic" and "disastrous" as not words one usually associates with HSBC. But they were being thrown around with wild abandon yesterday as the market woke up to the first profits warning in the 167-year history of Britain's biggest and most prestigious banking group.
The first came from the mouth of an HSBC spokesman; the latter two were used by analysts to describe a truly horrific trading statement in which the company was forced to admit it had got its figures on non-performing loans - bad debts - badly wrong.
While the market had expected provisions of about $8.8bn (£4.5bn) to cover these, the bank was forced to admit it will need to set aside nearer $10.6bn. The reason? The US sub-prime lender, Household.
Everyone knew there was a problem with the business, which offers mortgages and other loans to people whose poor credit histories mean they are shunned by mainstream lenders.
The company was forced to admit in December that it was grappling with difficulties at the operation, bought for $15bn in 2003. Some clients were defaulting on second mortgages within just six months of taking them out.
What it didn't take into account was a fundamental problem with the US housing market. There has been an unprecedented construction boom in the US over the past 15 years. So much so that the Goldman Sachs economist, Jan Hatzius, estimates there are about 1.5 million excess homes in the US.
Combined with that is the impact of 17 successive interest rate rises in two and a half years, taking them up from 1 per cent to 5.25 per cent. Aside from a few "bubble" areas (central Manhattan, for example) these two factors have caused house prices to fall.
February 09, 2007
The $10 billion meltdown at HSBC (so far) and how the US housing crash may eventually destroy the world financial system
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16 comments:
What's really absurd here is that the market was "expecting" 8.8 billion or so in losses. That was going to be "normal" and "expected".
WTF!
I wonder how many of those "6 month foreclosures" immediately re-fied to the max on newer, higher appraisals? How long does it take for 10% a year inflation to catch up with a house 'valued' at $650K, when it’s only worth $80K?
10 billion can become 100 billion real quick
Dont forget the real time bomb waiting to erupt, the derivatives lying underneath this mountain of bad mortgages.
The worlds governments will once again have to regulate these private banks. They arent really banks anymore, they are all hedge funds.
A massive bankruptcy reorganization of the current banking system,led by a concert of sovereign governments will have to occur soon if we are to avoid major wars and depression.
HSBC: what a bunch of morons. You fire them now is a reward! These guys just wracked up pay & bonuses on lots of flim-flam deals... the market has dried up and with it their easy money. So now, you do them the favor of pushing them out the door? WTF?!? They're going to live like kings in the Carribean while the whole mess collapses. If anything, these are the guys who ought to be retained and made to go down slowly and painfully with the ship. Half their salary should be re-directed to the good behaving folk.
Don't worry. The risk is spread out using collateralized debt obligations. It's all already priced into the market. Risk? No risks. All these bad loans are collateralized away. They gravy train will roll on forever. The commission checks will roll in forever. Now where's the silver spoon that I use to eat my rainbow stew?
Blah blah blah blah blah.
They lost $10 billion? Do you know what this means? That's right, BONUS TIME!!!
HSBC
Home Sold Bad Credit
SOLD in San Diego doesn't mean SOLD. . .at least 5 new large condos will be on the market between now and July - many say "sold out (Electra) or "50% sold" . . .had dinner with former RE agent last night who told me the lowdown - people put up 15% to hold a condo, these projects were either sold out or presold two years ago when the market was hot - now that the product is "being delivered" these thousands of people have to come up with the other 85% - either loans or cash. . .he feels most will just walk away from their deposits, because most people were going to flip, and many others who were going to live there can't get financing because lending rules have become tight - should be a real interesting year here in SD when all these people walk away from 100K rather than face financial ruin!!
The sheeple simply do not understand, we americans; especially the CEO types, its screw you and its all about me, and its about me now; And these people get idolized. ROTFLMFAO
This country has hit its moral low ground, but the problem remains, that we are setting new lower standards daily. When this thing totally falls on its arse, the healing may begin.
It really is to bad, but you know when the schiett really hits hopefully those 'commies' who put companies ahead of the people, will bail and leave the cleanup to the real americans; then we can get things right.
"Goldman Sachs economist, Jan Hatzius, estimates there are about 1.5 million excess homes in the US."
This is the first estimate I've noticed. There is definitely excess which is one factor of dozens of reasons why housing will be in bad shape for years.
Now we know the reason for those great 5% plus APRs on savings accounts offered by HSBC. Gotta finance all those pathetic sub-prime loans from moronic flippers!
This bank is the 3rd largest in the world. If it is hurting, what about the U.S. banks. Are we being deceived? Again? I'm waiting for the big shoe to drop! The Brits. have usually been a bit more honest, believe it or not! The U.S. bankers have been using the new Enron endorsed industrial strength sreaders! While they pack their $100 bills into the Samsonites. Argentina here they come!
Let the good times roll!!!!!
Gold. Be there or taste the Grapes of Wrath.
Cash will not be king. You will be King if you have the Gold. The Greater D approaches. Mark these words.
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